MOSCOW, September 16 – President Dmitry Medvedev insisted Monday that Russian markets were not in crisis despite a seven-point drop that pushed the main stock market close to 50 percent below its May high.
Addressing Russia\’s most powerful businessmen at the Kremlin, Medvedev said the country would ride out the financial earthquake that shook world markets Monday after the collapse of US financial giant Lehman Brothers.
"Despite the global economic problems that exist today, the situation on our market on the whole is stable," Medvedev said. "We do not have a crisis or a pre-crisis situation."
"Although, of course we are not closed off from international problems, I think it is within our power to solve these problems on the internal market," he said.
Despite the soothing words, Russia\’s benchmark RTS dived seven percent on the collapse of Lehman Brothers and a sharp decline in the oil price, before recovering slightly.
The benchmark RTS index hit a low of 1245 points, almost exactly half the May 19 close of 2487.
The market recovered slightly to end the day\’s trade down 4.7 percent. The ruble-denominated MICEX closed down 7.18 percent.
The bankruptcy of Lehman Brothers set the tone for Monday\’s losses, hitting Russian banks hardest, but most of the losses followed a four-percent fall in the oil price, said Stanislav Kleshchyov, an analyst with Vneshtorgbank.
Before the latest wave of turmoil on Wall Street, investors were selling Russian stocks on falling commodity prices, turmoil in international markets and unpredictable actions by the government, analysts said.
Increasing tensions with the West stoked by Moscow\’s military intervention in Georgia last month have also hit prices — the RTS has fallen 30 percent since the conflict began.
Medvedev estimated last week that a quarter of the market\’s losses were due to the war, in part due to fears a stand-off with the West would hurt business.
In a bid to reassure business leaders Medvedev said Monday that the government did not want this to happen.
"We do not need isolation or an arms race," Medvedev said. "This is a road to nowhere."
The government\’s main task is "to provide additional liquidity on the internal market," he said.
One of the participants, Viktor Vekselberg, said Medvedev promised to remove one source of investor uncertainty by taking a decision on whether to decrease oil taxes by the end of the week, Interfax news agency reported.
The market collapse has so far had little impact on tens of millions of middle-class Russian whose lives have been transformed by a five-year boom.
But the fall has revived uncomfortable memories of the August 1998 financial crisis which cut short an earlier boom exactly 10 years ago.
Several analysts described Monday\’s low as a buying opportunity, but others were more pessimistic.
Investors should give up hope of "one more time waiting for the bottom of the market," said Madina Buganova, an analyst with the Aton brokerage. "It is time to wait on the sidelines."